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Question
The following is the balance sheet of James and Justina as on 1.1.2017. They share the profits and losses equally
| Liabilities | ₹ | ₹ | Assets | ₹ |
| Capital accounts: | Building | 70,000 | ||
| James | 40,000 | Stock | 30,000 | |
| Justina | 50,000 | 90,000 | Debtors | 20,000 |
| Creditors | 35,000 | Bank | 15,000 | |
| Reserve fund | 15,000 | Prepaid insurance | 5,000 | |
| 1,40,000 | 1,40,000 |
On the above date, Balan is admitted as a partner with a 1/5 share in future profits. Following are the terms for his admission:
- Balan brings ₹ 25,000 as capital.
- His share of goodwill is ₹ 10,000 and he brings cash for it.
- The assets are to be valued as under:
Building ₹ 80,000; Debtors ₹ 18,000; Stock ₹ 33,000
Prepare necessary ledger accounts and the balance sheet after admission.
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Solution
Revaluation Account
| Dr. | Cr. | ||||
| Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
| To Debtors A/c | 2,000 | By Building A/c | 10,000 | ||
| To profit on revaluation transferred to | By Stock A/c | 3,000 | |||
| James Capital A/c | 5,500 | ||||
| Justina Capital A/c | 5,500 | 11,000 | |||
| 13,000 | 13,000 | ||||
| Dr. | Capital Account | Cr. | |||||
| Particulars | James | Justina | Balan | Particulars | James | Justina | Balan |
| To Balance c/d | 58,000 | 68,000 | 25,000 | By Balance b/d | 40,000 | 50,000 | - |
| By Reserve Fund | 7,500 | 7,500 | - | ||||
| By Bank A/c | - | - | 25,000 | ||||
| By Revaluation | 5,500 | 5,500 | - | ||||
| By Bank A/c (Share Goodwill) |
5,000 | 5,000 | - | ||||
| 58,000 | 68,000 | 25,000 | 58,000 | 68,000 | 25,000 | ||
| By Balance b/d | 58,000 | 68,000 | 25,000 | ||||
| Dr. | Cash Account | Cr. | |
| Particulars | ₹ | Particulars | ₹ |
| To Balance b/d | 15,000 | By Balance c/d | 50,000 |
| To Balan Capital A/c | 25,000 | ||
| To James Capital A/c | 5,000 | ||
| To Justina Capital A/c | 5,000 | ||
| 50,000 | 50,000 | ||
Balance Sheet as on 01.01.2017
| Liabilities | ₹ | ₹ | Assets | ₹ | ₹ |
| Capital Accounts | Building | 7,000 | |||
| James A/c | 58,000 | Add: Appreciation | 10,000 | 80,000 | |
| Justina A/c | 68,000 | Stock | 30,000 | ||
| Balan A/c | 25,000 | 1,51,000 | Add: Appreciation | 3,000 | 33,000 |
| Creditors A/c | 35,000 | Debtors | 20,000 | ||
| (−) Unvalued | 2,000 | 18,000 | |||
| Bank | 50,000 | ||||
| Prepaid insurance | 5,000 | ||||
| 1,86,000 | 1,86,000 |
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RELATED QUESTIONS
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Write the word/term or phrase which can substitute the following statement.
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Account which is opened to record the gains and losses on revaluation.
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Vrushali and Leena are equal partners in the business. Their Balance sheet as on 31 March 2018 stood as under.
| Balance Sheet as on 31 March 2018 | |||||
| Liabilities | Amt. (₹) | Amt. (₹) | Assets | Amt. (₹) | Amt. (₹) |
| Sundry Creditors | 90,000 | 90,000 | Cash in Bank | 62,000 | |
| Capitals: | Debtors | 31,000 | |||
| Vrushali | 45,000 | 75,000 | Less: R.D.D | 1,000 | 30,000 |
| Leena | 30,000 | Building | 55,000 | ||
| General Reserves | 18,000 | Machinery | 24,000 | ||
| Bills Receivable | 12,000 | ||||
| 1,83,000 | 1,83,000 | ||||
They decided to admit Aparna on 1st April 2018 on the following terms:
1. The Machinery and Building be depreciated by 10%. Reserve for Doubtful Debts to be increased by ₹ 5,000
2. Bills Receivable are taken over by Vrushali at the discount of 10%
3. Aparna should bring Rs. 60,000 as capital for her 1/4th share in future profits.
4. The capital accounts of all the partners be adjusted in proportion to the new profit-sharing ratio by opening the current accounts of the partners.
Prepare Profit and Loss Adjustment A/c, Partner’s Capital A/c, Balance sheet of the new firm.
Revaluation A/c is a _________.
Seenu and Siva are partners sharing profits and losses in the ratio of 5 : 3. In view of Kowsalya admission, they decided
- To increase the value of building by ₹ 40,000.
- To bring into record investments at ₹ 10,000, which have not so far been brought into account.
- To decrease the value of machinery by ₹ 14,000 and furniture by ₹ 12,000.
- To write off sundry creditors by ₹ 16,000.
Pass journal entries and prepare a revaluation account.
Radhika and Vijay were in Partnership Sharing profits & Losses in proportion of 3:2 respectively. Their Balance Sheet as on 31st March, 2020 stood as follows.
| Balance Sheet as on 31st March, 2020 | ||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | |
| Capital A/cs: | Premises | 2,80,000 | ||
| Radhika | 2,00,000 | 3,20,000 | Furniture and Fixture | 22,800 |
| Vijay | 1,20,000 | Stock | 54,000 | |
| Current A/cs: | Debtors | 18,200 | ||
| Radhika | 2,400 | 5,200 | Cash at bank | 2,200 |
| Vijay | 2,800 | |||
| Loan from Omkar Balu | 40,000 | |||
| Creditors | 12,000 | |||
| 3,77,200 | 3,77,200 | |||
On 1st April, 2019 Omkar was admitted to the firm on the following terms:
- Premises were to be valued at ₹ 3,40,000 and Furniture and Fixtures at ₹ 20,800. A provision for Bad debts on 2,000 was to be made. Stock should be revalued at ₹ 58,000.
- Omkar Should bring in ₹ 80,000 as Capital and ₹ 20,000 as his share of goodwill and it was retained in the business and he should be given one-fourth share in the future profits.
- The Loan from Omkar Balu was repaid through NEFT.
Prepare Revaluation Account, Partners Current Accounts and Balance sheet of the New firm.
